In the 90s, some kids would save up every dollar they made from doing chores and working a summer job in order to buy those coveted Air Jordan sneakers or a 23 Chicago Bulls jersey. In 2020, children are asking their parents to get them Robux instead of cold hard cash, so they can buy their favorite gamer’s skin in Roblox.
The Weeknd’s recent TikTok concert, which was produced in partnership with the Wave XR, included closeups of the singer’s shoes, outfit and even the car he drove in one of the songs. At the time of publishing, the concert hashtag had received more than 1.1 billion views, and shows how gaming, social media and entertainment are continuing to converge.
Additionally Snapchat just launched a brand partnership with fashion label Ralph Lauren where a user can select apparel from the brand’s new collection and outfit their Bitmoji avatar virtually with the selected outfits.
There’s a change happening in how we express ourselves in the digital world and it’s giving rise to the emergence of what’s been termed Direct-to-Avatar Commerce.
So we must ask, is director-to-avatar the new direct-to consumer?
“Direct-to-avatar (D2A) refers to an emerging business model selling products directly to avatars (D2A) – or digital identities – bypassing any supply chain management like dropshipping, logistics of how to get a physical product to a consumer’s door,” said Ryan Gill, co-founder and CEO of Crucible. “D2A brands are being sold in social or competitive virtual environments like games or open worlds where consumers project themselves as an avatar. Crucible is about making this an easy shift for both consumers & brands to make.”
It’s said that the significance of direct-to-consumer was that it allowed brands to enter the market directly — instead of through a middle-man entity. However, that still relies heavily on third parties for shipping and handling and it becomes a race to the bottom on who can get to the front door quicker. D2A will remove another layer of the friction that still exists for brands and allow some to reinvent themselves and find new inspiration.
Atoms vs Bits
For Gill, digital transformation means reimagining the world of atoms into a world of bits and pixels. Some industries – born from the internet – have been far ahead of this curve; and other, more legacy industries still remain resistant. In the post-COVID world, brands will need to rethink their business strategies all over again. The option of holding on to the old paradigm is becoming less variable with each year. 2020 is putting the nail in that coffin.
The Emergent Economics of Gaming
The Open Metaverse is being born partly from gaming.
“What used to just be a sequence of levels punctuated by a boss to defeat at that end, has become vast free-to-play open worlds with economies where people spend billions of hours and dollars a month, socially and competitively. It’s where 30 percent of the planet is hanging out. It’s also COVID-proof,” added Gill. “Playing increased 75 percent during peak hours in the first week after lockdown, and March was a $10B month for gaming. Billions of people are living and spending their money online through their avatars within these worlds. So now the main way the creators of these games make money is by selling stuff inside called “skins” or outfits and ways to express themselves differently.”
Free-to-play games generated $20.6 billion in 2019. One of the biggest ones, League of Legends earned $1.5 billion in revenue from these skins in 2019. The other big name, Fortnite generated $1 billion of its total $2.4 billion from in-game skins on the avatar marketplace. Gamers want avatars, skins and collectible content. This is all expected to reach $50 billion by 2022.
“The emergence of the metaverse as a computer-generated scaled shared space means that there will be a whole new (virtual) world where we can express ourselves and potentially introduce a different version of who we are all while playing together, learning together, creating together and more. Essentially, we think of the metaverse as the next global utility. To that end, we started a new company that creates insanely fun experiences for the metaverse, starting with games for Roblox”, said Yonatan Raz-Fridman, founder & CEO of Supersocial, Inc.
Designer x Skins
Don’t just think of these skins as exclusive to the IP of a specific game. Louis Vuitton has designed skins for League of Legends in a cross-collaboration with Riot Games. The Qiyana skin was designed by Nicolas Ghesquière, Louis Vuitton’s artistic director of women’s collections.
Another example, Gucci has teamed up with developer Wildlife on a Tennis Clash. The Gucci x Tennis Clash collaboration allows players to discover exclusive outfits designed by the Italian fashion brand and players can purchase clothing items to match their Tennis Clash character on Gucci’s website.
“It would be a mistake to think of this like a digital billboard in video games. The opportunity is to give brands a full presence within these new worlds, Louis Vuitton designed the championship trophy for League of Legends and Gucci created an entire in-game tennis tournament called the Gucci Open. The skins are a way to plant the seeds within a game world and it represents an entirely new blue ocean of avatars to sell to,” continued Gill.
The next logical shift from direct-to-consumer is direct-to-avatar. High-end fashion and streetwear brands seem to be recognizing this first, but this is not unique to just them.
Epic Games is taking some incredibly impactful steps with their Unreal Engine when it comes to real-time film production and distribution. They just recently announced an Unreal Fellowship for a 30-day intensive blended learning experience designed to help experienced industry professionals in film, animation and VFX learn the Unreal Engine to foster “the generation of teams in the field of real-time production”. They have already hit their 200,000 application limit.
For Gill, one day very soon people will buy tickets to watch films produced and distributed completely in Unreal, at an in-world theater, through the eyes of their avatar.
“Avatars are a direct reflection of a player’s identity, especially if they are created as digital twins,” says Samantha G. Wolfe, NYU Adjunct Professor and Founder of PitchFWD. “The more embodied you feel in your avatar, the more likely you are to invest in its appearance and behavior traits. For example, a $10 Louis Vuitton skin might be expensive in the virtual world, but, if the digital purchase allows you to live vicariously in your favorite fashion designer’s clothes, $10 becomes an affordable luxury.”
Products are only one part of this. We now exist in an experience economy. Tomorrowland just used the Unreal Engine to completely re-create their massive music festival with DJs streaming live from their homes and approximately 1 million people bought tickets to the event.
More well known, Travis Scott made waves with his Fortnite collaboration, using the entire open world as a stage to perform and debut a new single to just under 30 million people. Travis’ company Cactus Jack also released a whole new pack of skins during the week of his drop. Numbers for skins sales are not public, but even at conservative estimates Epic Games would have made $10 million and Travis over $2 million – for the week. To compare, Travis usually makes around $500,000 in merchandise sales per arena stop on his tour.
Education is set to see some exceptional improvements through these game engines. There’s no more reason for expensive overheads and limited classrooms with overworked and underpaid teachers. Gill shared “the virtual campus that Axon Park is creating is a really exciting example of what education can look like direct-to-avatar.”
“I believe this is even pointing to the future of work and how we make a living. L’Atelier conducted an in-depth study of these “virtual economies” earlier this year and found that “there are already hundreds of thousands of people earning real income from virtual platforms globally, generating over $66 billion in gross value added, higher than the GDP of Bulgaria,” highlighted Gill.
Advice for CMOs
Every CMO should be taking game engine technology seriously. The future is being built with them. This will touch and transform nearly every industry that belongs in our future.
Wolfe adds, “The Stanford Human Interaction Lab coined the term “The Proteus Effect” about how avatars can change behavior in real life. Although Nick Yee and Jeremy Bailenson’s 2007 study focused on avatar overall attractiveness and height, this direct connection between real and digital offers marketers an opportunity to integrate the virtual world in their campaigns with a high likelihood of an increase in consumer purchases in the physical one.”
For Gill, “if you are a consumer company, Unreal or Unity should be added to the stack of how you think about running your business. Period. It’s as important as a website, mobile app or social media was. If you were kicking yourself for how long it took you to leverage those – you have another, much bigger opportunity on the horizon. Our Emergence SDK will arm these engine developers on your team with all the tools needed to create a robust D2A strategy.”
With D2A, things change. According to Gill, a good way to think of this is to imagine replacing your supply chain with design sprints and previsualization. Designing and prototyping everything in 3D allows you to share and review internally with stakeholders – then ship, market and sell without ever creating a product and distributing physically. The cost, scale and speed at which you can work could completely give your business new life. You get to push things past the boundaries of physics and reality and tap into a whole network of customers and future generations.
Supply and demand relies heavily on scarcity, especially with high end brands. Fashion is the perfect pioneer for this new world, and specifically streetwear & sneakerhead culture. Brands like the billion dollar Supreme have been making a killing with cross-brand collaborations and limited edition drops for over a decade. It seems obvious to me that this kind of business model is what we’ll see more of with Direct-to-avatar commerce.
Knock-offs are a real problem with sneakers and other high end fashion or streetwear, authenticity is key.
“To say it simply, people like to flex and if it’s fake it’s not as cool. It’s no different when they’re avatars. Part of what our technology will do for a brand is give them authentic digital scarcity and allow them to create white-labeled marketplaces which are placed in-world so they can sell direct-to-avatar safely and securely. We protect both the brand and the customer to support a network of new marketplaces, first with the Mozilla Web Monetization Standard and ultimately the Crucible Artefact Standard for D2A commerce,” added Gill.
The Next Renaissance
Avatars don’t just buy, they also create. Gill’s Crucible wants to provide the blueprints for this new renaissance. Sandbox titles like Minecraft, Roblox and Fortnite Creative rely on User Generated Content (UGC), which I think has the potential to create a whole new wave of entrepreneurship. Roblox expects to pay out $250 million to their mostly teen developers making things with their tools.
“We believe that a whole new world is emerging in which people of all ages will be able to not only play in these scaled shared virtual spaces but also to create, learn and make a living. A new generation is now actively proving that computer games are one of the most powerful forms of learning, creation and self expression, and we should relentlessly empower that”, added Raz-Fridman from Supersocial.
The level of quality for UGC has come a long way and we see a way to unlock the collective reinvention of the economy through the ten million game developers and the nearly three billion people who navigate these worlds spending significant time and money as avatars.
Gil concludes that with Crucible, users will find an ever-present interface to everywhere they go in the Open Metaverse and on the web. This allows them to manage and access their data and digital property at all times, and have control of all their wallets and relationships – making the player the platform and giving brands a direct, secure channel into these new networks direct-to-avatar.
Now the question is what brand of shoes was The Weeknd wearing during his TikTok concert and when will users be able to buy the Ralph Lauren outfit their Bitmoji is wearing so they can sport it in real life?
This article is written in collaboration with Ryan Gill, co-founder and CEO of Crucible, a company building technical foundations for the Open Metaverse and enabling the digital trust needed for direct-to-avatar commerce to become viable at scale.
— to www.forbes.com